Portugal pays interests below 4% for very long term debt

  • ECO News
  • 12 July 2017

Returning to longer maturities, IGCP financed itself in one billion euros. It placed 685 millions in ten-year maturities and 315 millions in 28-year maturities, in which it reached a rate below 4%.

Portugal was able to get lower interests in the very long term debt auction. The rate stood below 4% in 28-year maturity securities, which allowed IGCP to obtain 315 million euros’ financing. Overall, considering both auctions (ten and 28-year), IGCP obtained the one billion euros financing it aimed for.

In 28-years maturities, IGCP obtained 315 million euros; demand was 2.1 times the amount actually placed. This helped lower the rate demanded by investors in Portugal, dropping it to 3.977%. In the secondary market, the reference for 20-year maturities stands at 3.992%.

This auction had lower interests than last year’s for the same maturity, according to Bloomberg’s data. In the operation resorting to a banking syndicate, in April 2016 the Treasury payed an average interest rate of 4.235% to place one billion euros in debt.

Because it was able to finance itself with an interest rate below 4%, Portugal payed less than what is now paying for the official loans for the International Monetary Fund (IMF). That is the reason behind the early amortization of these loans: the last was made in the end of June and was worth one billion euros, while another 2,600 millions will be payed in August.

Ten-year debt is more expensive

Contrary to longer-term maturities, the return of ten-year debt auctions was more costly. In this auction, Portugal placed 685 million euros, as was the case for the secondary market in the past couple of weeks. The rate ended up at 3.085%.

This rate compares to the 2.851% average from the previous comparable auction from June, 14. This time, demand was much smaller: 1.52 times more than the amount ICGP wanted. By then, the Portuguese Treasury was able to place 750 million euros in ten-year maturities.

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